In this podcast, Motley Fool analyst Jason Moser and host Deidre Woollard discuss:
- Announcements from CES.
- What could make Apple's Vision Pro successful.
- The relevance of Twilio's CEO switch.
Motley Fool host Ricky Mulvey interviews Kevin Simzer, chief operating officer of Trend Micro, about cybersecurity in the cloud and new threats facing electric cars.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on Jan. 8, 2024.
Deidre Woollard: Is the Consumer Electronics Show still relevant? Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Deidre Woollard here with Motley Fool analyst, Jason Moser. Jason, how's it going today?
Jason Moser: Hey, doing great, Deidre. How about you?
Deidre Woollard: Doing well. I'm in my feelings a little bit because it's CES week. This used to be the week I used to work for a sister blog to Engadget, when Engadget was the thing and this was the week. It feels a little more lively now that you've in the last few years, but do you think is CES back? Has AI made CES relevant again?
Jason Moser: Well, I mean, definitely it feels like it's back from the last several years. It's just not really been front and center. I mean, there obviously been a lot going on over the last few years. But I think, also mean there hasn't been a ton in the tech world that has just been keeping us on the edge of our seats. "Sorry, metaverse, it's not me, it's you. You just aren't quite as special maybe as we were hoping you would be. At least not yet. Now maybe we'll find some better use case for you down the road." But I think AI has taken over that role as being that narrative, that headline, that one thing that everybody's really focused on.
That's neat, because the thing about AI is, because we're in such early stages with it, we're really just starting to learn about the implications, the ways that it can impact our lives. I think a lot of what AI is going to do is probably not going to be stuff that's front and center, and in our face, but it's going to be the stuff that's helping behind the scenes to make our lives better and easier and whatnot. But I certainly feels like CES is a little bit more back than it has been recently.
Deidre Woollard: Well, thinking about AI and everybody trying to put AI in everything, Volkswagen announced that it's putting ChatGPT in cars. This is interesting because, I mean, right now I don't really want ChatGPT in my car, but it's a down the road thing. They talked about how they want it to be this ongoing conversation that you might be having with AI in your car. Who knows where this will go. It might start with directions. It might lead to things like breaking news updates or things like that or where should I go for lunch? I don't know. Do you want ChatGPT in your car?
Jason Moser: It's really funny. I mean, I wonder what are people doing when they're driving that insists on having all of this stuff at your fingertips? I mean, I'm focused on the road, making sure I'm getting to where I want to go, and I either have a podcast or some music going, and that's usually about it. I mean, cars have done a really good job incorporating a lot of technology into them. I mean, we've said for a while, now they're really just becoming computers on wheels. That's no more true than today, I think.
But it clearly, as we move into this Internet of Things and everything becomes more connected, I mean, it's obvious real estate for these technology companies. I mean, finding the solutions that make the most sense for consumers. Entertainment, navigation, those are two really obvious opportunities. You see big chip makers that continue to make investments in the space. I mean, you get AE&D, Qualcomm, NVIDIA, and more continuing to really get their technology in these cars. You got smaller companies like Cerence, for example, which used to be a part of Nuance, then they split off from Nuance, Microsoft acquired Nuance. Cerence is on its own now, and Cerence is bringing their voice technology into the car. Again, focused on that intuitive AI assistant ChatGPT like, but again, focus really on entertainment, navigation, things like that. I think it's something that probably will develop a little bit more slowly than people might anticipate, but the first step really is getting the technology into the cars, and then learning where it can be most useful. I think we're in the middle of really discovering that, which is exciting.
Deidre Woollard: Well, you mentioned the metaverse earlier. You made a little face. You can't see it through the hearing, but this is there. It was a face.
Jason Moser: I was having fun.
Deidre Woollard: We've got Division PRO coming out, and now we've got some dates here. January 19th, you can pre-order it. It's going to be released on the 2nd. We'll see if people are lining up outside the stores. Is this going to be big? Are you going to be lining up? What do you think?
Jason Moser: Well, so I definitely, personally will not be lining up. I think we will absolutely see plenty of Apple fanatics creating a lot of buzz about it. I think that's exciting. I mean, this is really Apple's first step in this spatial computing paradigm, really, at least the first meaningful step, and it's very easy to get excited about it because it's Apple. Usually when Apple does something, they're going into it with plenty of research to really justify the opportunity. I mean, I don't think they would have gone into this willy willy. I mean, this is something they've probably seen a lot of the competition around them. I made a little joke about the metaverse earlier, and that really is something where I'm sure the metaverse is going to come up with more and more applications for consumers as time goes on. Again, something that probably just develops a little bit more slowly. But to that point, I think that is one of the important points to note with Apple and the Vision Pro. This is really just their first step. I think what this leads to is more discovery on their part into how they can improve this technology, but even more so what this technology ultimately can do.
I think that's what Apple and Meta and all of these headset companies are really trying to figure out, "We've got this technology out now, now what can it do?" It has to be that way. I mean, you need to get the technology out there and start experimenting with it and trying it out in different areas in order to get an idea of really where it's most useful, and where it can be most helpful. That just is going to take some time to develop. I mean, I don't know that that's something we should expect something in the next couple of years where all of a sudden now the metaphors is just mainstream, because of this killer app that's been discovered. I mean, I think they're going to discover some "Killer apps." But I think it's something that's going to take some time. I think this is something where we're going to see Apple using this high end device to then help them build more compelling lower end devices that ultimately will be able to reach out to the consumer. I mean, I do continue to believe that the biggest hurdle for these headsets is the form factor. Just anybody's warm with these headsets. It's just not just the Vision Pro, it's any of them. I mean, these headsets are just cumbersome and heavy and uncomfortable, and you don't want to wear them for very long. But this is the step in getting to where they ultimately need to go, where they can go. That will take some time. I think that once they can really crack the code on that form factor, I think that'll open a lot of things up. But it's neat to see them making progress in the space, for sure.
Deidre Woollard: Well, it starts with a device and it ends with an ecosystem. We're just at that point and thinking about where the iPhone was when it launched. I wonder if this time Apple is going to have a little bit of a different strategy in terms of how quickly it lets other people play in its playground. it's a different Apple since when the iPhone first launched. Do you think that there are some companies that might benefit from this in the VR space or will there be some more that emerge?
Jason Moser: Well, definitely. I think one of the things we talked about with his Vision Pro is, this is this initial iteration is going to be something I think more for professionals and developers in order to figure out those applications and those "Killer app," so to speak. It's nice to see that Apple has allowed for that partnership ecosystem to begin. I mean, it's not something where they're just going it all alone. I mean, they've got companies, like Adobe, for example, working with Apple to create experiences and exploit this technology for his best use case scenarios.
Jason Moser: I mean, Adobe stands out is one that certainly could benefit down the road, but I think there are going to be plenty of companies that ultimately Apple will saddle up with in order to try to make this the most useful, productive, and enjoyable experience as possible.
Deidre Woollard: With CES, we're not there walking the floor, but I've been watching the press releases come out. Some of it, I don't need an AI Cat door, but some of the things that I find her interesting is the transparent screens, so LG, it's a transparent LED screen, Samsung showed off this transparent micro LED screen, it's really beautiful. We don't have any details on pricing yet, but I wonder like, do we want these transparent screens? Is this one of those things do you think is a Gimmick or the future of something really beautiful?
Jason Moser: Yeah, I don't know that's a really good one because I looked at these examples and the technology and you're right on the one hand, it's amazing technology, it produces these crisp images, just beautiful screens and it's almost like it's just a hologram. Which is neat, I mean, that really is a little bit of a look into ultimately what the future could look like, then the flip side is to that, what is the core use case for these? Is it just another model of a TV? Is it just something, I mean, are we looking to put this in our living room or is there another use case that could go with it? I mean, I think there are plenty of use cases where it could apply and maybe the use cases for technology like this are a bit more apparent in the enterprise side of things. I don't know, I think that that's something we'll have to wait and see, I mean, I think cost is going to be something that matters, like you said, there's not a lot of information in regard to cost there. But I think one thing I did find in regard to Samsung, these non transparent micro LED TVs that they have are running $150,000 for a 110 inch model and so it's not cheap. I mean, look at that Vision Pro and we talk about how cost prohibitive that could be, clearly this screen technology is going to be somewhat cost prohibitive for consumers, at least in the near term, but it's definitely a window into what could be. I guess the question is, is this the new form factor or is this the next 3D television? That I think is the question we just don't have an answer to yet, and for those not keeping score, the 3D television that turned out to be kind of a flop.
Deidre Woollard: 3D is one of my favorite things because it comes up every 20 years or so, we get all excited about it and then it goes away again, it's like movies, it's just something keeps coming up and keeps going away.
Jason Moser: Well, I mean that's similar to these headsets too, I mean, these headsets are bringing that more immersive technology and on the one hand it's amazing technology, but on the other hand, is it what people really want? I just don't know. I mean, obviously 3D television was not something that people want. These headsets have done well to the extent that they've sold a number of them, but an ongoing story is that they ultimately just turn into dust collectors, people get them, they use them for a few weeks. They don't really find them to be all that tremendously useful and so then they just sit in the corner and collect dust because we really haven't discovered the core use case for why we need them yet as opposed to maybe wanting them. Gaming always stands out as the core use case for a lot of this technology and so I could see technology like this making some waves in the gaming space for hardcore gamers looking for that, the best experience possible, that doesn't really extend itself to the mass consumer and so again, that's where Tom will tell.
Deidre Woollard: Star of the show so far in video, it's different because there's not like a TV you can look at, but they did come out with a whole bunch of announcements in video, tends to do this where they just blitz you with a bunch of press releases. But I think the thing that I thought was most interesting is the shot across the bow at AMD with newer cheaper GPUs and so I feel like this is an interesting battle, I don't know as much about it as probably I'd like to more than I do. But how should we be thinking about the competition here with Nvidia saying like we can make beautiful technologies just as cheaply as you do.
Jason Moser: Well, yeah, it sounds like what Nvidia is ultimately trying to do here, at least with this chip sweep that they've rolled out and a lot of it centers around AI, but it's ultimately trying to make that leap from AI going from behind the scenes and helping us in ways that we can't really see and helping businesses in ways we can't really see to bringing it front and center, going from server to local. We see Microsoft trying to do the same thing, bringing that Co-pilots key to the actual keyboard of a laptop in this case you've got Nvidia trying to bring this AI technology to the consumer in the laptop or the desktop form and making it more accessible for us as consumers. I think that really is exciting because with all of the talk about AI and we see the potential, I think it's a lot easier to see the potential and how it can help at the enterprise level because those are big, often inefficient organizations that could benefit from streamlining and doing things more efficiently. But that doesn't really, that's not so sexy for the consumer, the consumer is asking, well what about me? How does AI help me? This is a step in that direction, bringing AI more front and center directly in front of the consumer and so, being on PC, being on desktop, I mean, ultimately being on mobile, I mean, that's what these companies are ultimately looking to do. Yeah, I think it's exciting times, we're going to see, I think plenty develop here at CES and it's going to set the table I think for some exciting shows here in the future as well.
Deidre Woollard: Yeah, I totally agree. Well, I'm going to pull us away from CES for a second 'cause there's a little bit of news I wanted to hit, wanted your take on, you recently called out Jeff Lawson of Twilio as CEO on the hot seat. Well, the hot seat got really hot [laughs] because he's moving on, he's a co founder, he's leaving the board as well, you've got someone who's been at the company for a long time taking the reins. We know the activists aren't going to be happy about that, but how are you thinking about that move?
Jason Moser: Well, to me it feels like it was something that was more or less inevitable, I mean, you're right the 2023 Motley Fool Money preview show, one of the questions like for the show was who's a CEO on the hot seat? I said Jeff Lawson to me was a CEO on the hot seat because he's in this position with Twilio where Twilio is a good business. It has developed this tremendous suite of offerings. But now it really got to the point where they need to focus on making some actual money and focusing on the core competencies of the business and it just felt to me along the way that Lawson is more of an entrepreneur and maybe the company had hit that stage where he needed to step aside and let an operator come in to maybe help take this business to the next level. We see it often I mean we see plenty of businesses from small getting established companies like Marqeta to larger companies with longer track records of success like Chipotle. I think in this case it probably makes the most sense, I mean, there's clearly some activism in there that might have prompted this or at least hastened it and it's not to say that Lawson won't have any say so in the matter, at least for now, I mean, he does still own a good portion of the company. It does have that dual share class structure, so we'll see how that ownership interest shakes out here over the coming quarters and years. But I think ultimately this is probably a good thing for the company is it's going to give them a chance really, to take that next step and become mainstream, established, profitable, and really become the type of business that investors in Wall Street are ultimately looking for.
Deidre Woollard: Well, we'll have to wait and see, thanks for touring it yes with me today, Jason.
Jason Moser: Thank you.
Deidre Woollard: We talk about a lot of stocks on the show, but it's just a peek at the Motley Fools investing universe. This year we're rolling out a new offering. It's called Epic Bundle, the service includes seven stock recommendations every month, model portfolios and stock bankings, all based on your investor type. We're offering Epic Bundle to Motley Fool Money listeners at a reduced rate, as a thanks for listening to the show. For more information, head to www.fool.com/epic198, we'll also include a link in the show notes for you. We're staying on the tech theme, Ricky Mulvey caught up with Kevin Seimser, the Chief Operating Officer of Trend Micro, to talk about cybersecurity in the Cloud and the new threats facing electric cars.
Ricky Mulvey: I know the company, you have more than 3,000 engineers basically protecting enterprises and people against cyber threats, it's been around for more than three decades, it's less discussed, I would say, in the full universe. I'd say less discussed in general, in part because your company spends a little bit less on marketing than some of your competitors, your company has a big focus on Cloud security. You've been in that space for a while, big focus on endpoint security or the connection between, let's say, the device you're using right now and those big Cloud servers that are storing everything to the lay person. Can you go through what's the offer for customers from Trend Micro, especially as those Cloud providers, including Microsoft, have their own security options.
Kevin Seimser: Thanks Ricky, for the set up and perhaps we should be more well known because it really is an American success story, can you believe that it was founded, that we were founded over three decades ago in Los Angeles, California. Started as a start up in a garage, went on to become a multibillion dollar cybersecurity giant doing business across the globe and one of the things I'm really proud of in terms of the trend micro performance is actually our business is much more global than what many people think. Around 25% of our business comes from the Americas, 25% from Europe, 25% from the Middle East and Africa, Southeast Asia, and then 25% from Japan, where we're formerly headquartered. Much more resilient and global than many of the other cybersecurity providers, we have evolved substantially by building out a cybersecurity unified platform that we offer, we do in all things up to and including Cloud security like you pointed out, Cloud security is big globally.
Kevin Seimser: But in particular in the US where many people are adopting Cloud and we're there to protect them. IDC actually have us as the number one Cloud security company in the world.
Ricky Mulvey: What are the kinds of Cloud security threats that you're defending against? What do those look like compared to maybe ones that enterprise has experienced in the past?
Kevin Seimser: It's interesting. In an enterprise, we all got pretty comfortable with an environment where we built these walls around our enterprises. Gradually those walls ended up with more and more holes through the walls because we needed to connect our supply chains and everything else up. In the Cloud world, in particular, our largest Cloud service provider, which is AWS, they've adopted something called a shared security responsibility model, where AWS is responsible for protecting the infrastructure but customers that adopt AWS need to think about the application itself, and that's where we come in. It takes both AWS and ourselves in order to keep the adversaries out. Adversaries are sitting there watching, looking, learning, and trying to work their way into those critical applications now that are running in the Cloud. It's a big deal for many of our customers.
Ricky Mulvey: One place I know you've been working on as well in a podcast last year you said it was an area of focus is electric vehicles. Can you talk about your work in this space and what electric vehicle companies customers would need to be mindful of in terms of cyber threats?
Kevin Seimser: Actually the New York Times coin to cybersecurity giant. As a cybersecurity giant, you end up having your hands in lots of different things. We have our core business, like we talked about earlier, protecting everything from endpoints to email, Cloud network, OOT environments. That's our core business but because we're threat practitioners, we're cybersecurity practitioners we also have a view of what else is going on in the industry. A couple of things that really intrigued us, one was around all things, 5G, so security around 5G. Another one that interested us in a big way was security around the entire EV ecosystem. Not just the cars, but the charging stations and whatnot. What we did to address that is we actually spun off wholly owned subsidiary companies. We own them, but we felt like actually the go to market was going to be substantially different, some of the technology, the partners that we would need. Relative to EV, we created a subsidiary called Vic One, Vehicle One and that subsidiary is doing some really cool things. Working with automotive manufacturers, working with charging manufacturers in order to build out a set of security capabilities that can be incorporated directly into their platforms. We're taking the burden of protecting EV cars and protecting EV charging stations from adversaries, from denial of service attacks or whatever it happens to be. We build an offering and we make that available to the automotive industry. That's an exciting space for us. Gosh, we've got 100 people working on that now so it's a substantial investment that we have going into that. We all know that EV cars are the future and we're going to be there to stop the bad guys.
Ricky Mulvey: It's denial of service attack, basically, you can see that when a website just goes down, shuts down. It seems like that would be a different issue or it would be a terrible issue for a car and something to be expected. When you're talking to your team at Vic One with these kinds of threats, I imagine they're facing a ton. You have the denial of service attack. You also have these car manufacturers which I have personal opinion on, but they're doing a lot of subscription is a service offering. So BMW got famous or became a little infamous for charging people for heated seats. Then you have a lot of hackers trying to essentially jail break features within their car. I can't imagine that there's a lot of other issues that they're defending against. What do you think is issue number one for the Vic One team about questions for cybersecurity for the charging infrastructure and the cars. Is it a lot different from what you are traditionally doing?
Kevin Seimser: Well, one of the things that people need to think about, and we had to think a lot about is all of those threats. We thought about it ourselves but we also are the owners and sponsors of something called pune to own. In Japan, early next year, we will be hosting the very first pune to own conference where we will be soliciting researchers. We have around 3,000 independent researchers around the globe whose job it is is to we pay them to find vulnerabilities in areas that we find could be interesting from a threat adversary standpoint. In this case we're paying them to look at the overall EV, automotive ecosystem. They'll be finding vulnerabilities and writing exploits in order to try. That gives us a lot of insight as to what the threat actors are going to be up to. That's actually quite helpful in terms of providing that level of insight. For us, we can incorporate all that technology into our offering and make that available to the automotive manufacturers. We see it as a really tight grouping of smart people coming together in order to try and keep the threat actors at bay. The number one thing that people should be aware of is with an EV car is the over the air software updates. That notion of updating software over the air, receiving updates over the air, it creates an inroad into the car and that's one of the number one areas that could potentially be exploited. You could imagine, if a software update were ever hijacked and modified and it could do catastrophic things so trying to make sure that that doesn't happen is what we're fiercely focused on.
Ricky Mulvey: As we wrap up, we can focus back in on the company of trend micro does it had fairly good quarter that the market seems to be celebrating anything is going on with the business that you would want investors listening to Motley Fool Money to be aware of.
Kevin Seimser: I think there is Ricky. We publicly announced in January of 2020, business transformation. We were going to move toward this consolidated platform and we were going to start investing heavily in it. What we saw over the last few years is we saw the success of that platform start to build and grow. We're now up to 9,000 plus customers running on it, $750,000,000 plus in annual recurring revenue. We're seeing phenomenal growth happen in it. It culminated in our Q3 results like you pointed out. Our Q3 results were very strong, up 13% year over year. We surprised on the positive side, up 13% year over year on the top line, up 58% on the bottom line, 30% increase in cash flow. Truly our investors celebrated the performance. What we did was we took that and we wrapped it in, well, we're sitting on $2.5 billion in cash. What could we do to reward shareholders even more? We introduced a special dividend and a large cash share buyback. We were really thinking that let's reward shareholders for some of our positive performance here. As we go into 2024 and 2027, we see the business scaling even more, we see the top-line growth continuing, and we see even more bottom line performance. We actually made the declaration that 100% of our net income we will be giving back to shareholders for the foreseeable future. We're really feeling like we're financially sound. The ideology of our chairman, I'll leave you with this of our chairman. He's the founder and chairman of the company and he really pushes sustainable, superior performance. We've been around for over three decades, we want to be around for another three decades. You need to build a sustainable, superior-performing business in order to do that.
Deidre Woollard: As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Deidre Woollard Motley. Thanks for listening. We'll see you tomorrow.
